The Delhi Bench of Customs, Excise and Service tax Appellate Tribunal (CESTAT) has held that 12% interest on delayed refund of service tax paid by mistake.
The bench of Ashok Jindal (Judicial Member) has observed that appellant/assessee had paid service tax by mistake which is not payable at all and it shall be treated as Revenue deposit not service tax paid by the appellant. Therefore, the provision of Section 11B of the Central Excise Act is not applicable.
The appellant/assessee had claimed refund of service tax, which was deposited by mistake on construction of individual/independent houses. The refunds were rejected by both the lower authorities, but the Tribunal allowed refunds on merits, limitation and unjust enrichment after holding that such construction was not taxable prior to 01.07.2012 and was exempted from 01.07.2012 under Notification No. 25/2012-ST dated 20.06.2012.
In view of the Final Order of the Tribunal, the appellants filed a refund claim along with 12% interest. The refunds were sanctioned by both the authorities, along with 6% interest by invoking Section 11BB of the Central Excise Act, 1944.
The appellant has challenged the order sanctioning 6% interest.
The appellant deposited the amount on non-taxable and exempted services by mistake of law, but by any stretch of imagination, it cannot be said that such amount is an amount to service tax to attract Section 11B of the service tax.
The tribunal held that the appellant is entitled 12% interest on delayed refunds.
The CESTAT directed the department to pay 12% interest per annum to the appellant. All appeals are allowed by modifying the orders granting refund along with 12% interest.
Case Details
Case Title: Gajendra Singh Sankhla Versus Commissioner of CGST
Case No.: Service Tax Appeal No. 50876 Of 2024 (SM)
Date: 06.05.2025
Counsel For Appellant: Om P. Agarwal, Chartered Accountant
Counsel For Respondent: Kuldeep Rawat, Authorized Representative (DR)
